US hiring remains resilient as Federal Reserve grapples with inflation

Employers add 223,000 jobs, complicating central bank's goal to cool down prices

The US unemployment rate dipped from 3.6 per cent to 3.5 per cent. AFP
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The US jobs market remained resilient in December, making it more likely the Federal Reserve will continue acting aggressively to slow down the nation's inflation.

Non-farm payrolls exceeded expectations slightly, adding 223,000 jobs in December, the Bureau of Labour Statistics (BLS) reported on Friday. A survey of Bloomberg economists had forecast employers would add 203,000 jobs.

Meanwhile, the unemployment rate dipped from 3.6 per cent to 3.5 per cent, a 53-year low.

And wage growth grew by 0.3 per cent, below forecasts of 0.4 per cent.

The Fed has maintained that the tight labour market in the US has contributed to the nation's inflation, which currently stands at 7.1 per cent. A tighter labour market can contribute to inflation as jobseekers are empowered to negotiate for stronger wages, thus leading to increased spending.

Fed Chair Jerome Powell and the central bank have indicated that unemployment will likely have to increase for inflation to be brought under control.

The central bank raised its interest rates seven times last year to a range between 4.25 and 4.5 per cent.

Minutes released by the Fed showed that its members expect interest rates to remain at a high level this year.

“No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023,” the minutes read.

Its benchmark short-term interest rate is forecast to be 5.1 per cent by end of 2023, but persistent inflation and hiring could push the Fed to raise it even higher.

The Fed's actions brought US inflation down from a peak of 9.1 per cent in the summer to 7.1 per cent in November, but the moves have also raised borrowing costs for families and businesses such as mortgages and vehicle loans.

“We still have work to do to bring down inflation, and help American families feeling the cost-of-living squeeze. But we are moving in the right direction,” President Joe Biden said after the report's release.

Employers added 4.5 million jobs in December, down from 6.7 million in 2021, the BLS said.

Notable job gains for the month of December were found in leisure and hospitality, health care, construction and social assistance.

Meanwhile, layoffs have plagued technology companies in recent months.

Amazon announced this week that it would retrench more than 18,000 employees. And Meta chief executive Mark Zuckerberg said the company would cut about 11,000 positions.

Bloomberg contributed to this report

Updated: January 06, 2023, 2:59 PM
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